Indian Rupee Near All-Time Low Amid Risk, Capital Outflows
Source: Global Finance News
Reporter: MD Rubel Islam
Published: Dec -15 , 2025 — 10:00 AM (GMT+6)
 |
| Indian Rupee continues to hover near record lows against the US dollar amid weak risk appetite and rising capital outflows. |
Detailed News”
- Indian Rupee Near Record Low as Fragile Risk Sentiment and Capital Outflows Persist
- Indian Rupee Hovers Near All-Time Low Amid Weak Risk Appetite
Indian Rupee to Hover Near All-Time Low Amid Fragile Risk Sentiment and Skewed Capital Flows
Indian Rupee Near Record Low: What Is Driving the Weakness?
The Indian Rupee continues to hover near its all-time low against the U.S. dollar,
reflecting sustained pressure from a mix of global and domestic headwinds.
The USD to INR exchange rate has remained elevated as the rupee vs dollar struggle
intensifies amid fragile global risk sentiment, weak capital inflows,
and widening macroeconomic imbalances.
Market participants in the Mumbai forex market say the current INR weakness
is no longer driven by a single trigger. Instead, a convergence of risk-off sentiment,
persistent capital outflows, rising importer hedging, and thinning exporter dollar supply
has pushed the Indian currency into a vulnerable zone,
keeping volatility elevated and market confidence fragile.
Rupee All-Time Low Explained: Fragile Risk Sentiment Takes Center Stage
One of the most dominant forces behind the ongoing rupee depreciation
is fragile risk sentiment across global markets. Investors have grown cautious
as concerns over slowing global growth, geopolitical uncertainty,
delayed U.S. economic data, and shifting monetary policy expectations
continue to weigh heavily on overall investor confidence worldwide.
In a risk-averse environment, global funds typically move toward safe-haven assets,
leaving emerging markets exposed to sudden capital reversals.
India, despite strong long-term fundamentals and domestic growth potential,
is not immune to this broader global market pressure,
especially during periods of heightened uncertainty and volatility.
Weak Risk Appetite Hits Emerging Market Currencies
A weak risk appetite environment usually hurts emerging market currencies,
and although several Asian currencies have shown relative resilience,
the Indian Rupee has underperformed due to domestic flow imbalances
and persistent trade-related pressures unique to the Indian economy.
According to a currency trader India, the rupee is facing disproportionate selling pressure
because dollar demand from importers remains elevated, exporter dollar supply has thinned sharply,
and foreign portfolio inflows have slowed significantly in recent trading sessions.
This imbalance has resulted in skewed flows across the forex market,
with buyers dominating the daily order book,
while selling interest remains limited and strategically spaced out.
Capital Outflows and Trade Deficit India Add Pressure
Persistent capital outflows remain a major concern for the rupee’s stability.
Recent NSDL data shows continued foreign investors selling Indian equities and bonds.
When foreign investors reduce exposure, demand for dollars rises immediately,
putting direct pressure on the USD to INR exchange rate in onshore markets.
Capital outflows affect the currency in three major ways:
increased dollar demand, reduced foreign currency supply,
and a negative sentiment feedback loop that accelerates rupee weakness.
India’s trade deficit has widened due to higher imports
and only moderate export growth in key sectors.
This imbalance structurally weakens the Indian currency,
especially during periods of heightened global uncertainty.
A widening trade deficit means more dollars are required to pay for imports,
fewer dollars enter the economy via exports,
and the rupee remains under a sustained depreciation bias.
Importer Hedging and Exporter Dollar Supply Imbalance
With the rupee all-time low narrative gaining momentum,
importer hedging activity has risen sharply across sectors.
Importers are rushing to lock in dollar rates
to protect themselves against further INR weakness and volatility.
This behaviour increases near-term dollar buying,
skews daily market flows in favour of buyers,
and pushes the USD to INR exchange rate higher.
On the other hand, exporter dollar supply remains limited.
Exporters are holding back dollar sales,
expecting further rupee depreciation in coming sessions.
This cautious stance reduces market liquidity,
worsens the flow imbalance,
and keeps buying interest heavy while selling remains thin.
RBI Intervention and the Reserve Bank of India’s Role
The Reserve Bank of India (RBI) has intervened frequently
in recent months to slow excessive rupee volatility.
However, traders believe RBI intervention has appeared less forceful
after key psychological levels were breached in the currency market.
While the RBI aims to prevent disorderly market moves,
reduce speculative attacks,
and smooth excessive volatility,
it does not defend a fixed exchange rate level.
The RBI must balance currency stability,
forex reserve preservation,
and domestic liquidity conditions simultaneously.
Prolonged defense of the rupee becomes costly
during sustained risk-off sentiment,
especially when external pressures remain strong.
Global Factors Impacting Indian Rupee Today
The Dollar index remains elevated,
supported by firm US Treasury yield levels.
Higher yields make U.S. assets more attractive,
drawing capital away from emerging markets such as India.
A stronger dollar typically leads to INR weakness,
higher import costs,
and added inflationary pressure within the domestic economy.
India is a major oil importer,
and rising Brent crude price levels add another layer of stress.
Higher oil prices increase dollar outflows,
widen the trade deficit,
and hurt the rupee outlook.
Energy prices therefore remain
a key variable for the Indian currency’s near-term direction.
Central Bank Meetings in Focus This Week
Global investors are closely watching major central bank meetings,
which could reshape currency and capital flow dynamics worldwide.
Expectations of a Bank of Japan rate hike have strengthened the yen
and influenced global asset allocation patterns.
Any tightening by Japan could alter cross-border capital flows,
impacting emerging markets including India.
At the same time, expectations of a Bank of England rate cut
reflect slowing growth concerns in Europe.
Delayed US economic data, including inflation and employment reports,
could redefine interest rate expectations,
and significantly impact the USD to INR trajectory.
One-Month NDF and Onshore Forward Premium Signals
The one-month NDF market continues to signal downside pressure on the rupee.
Elevated onshore forward premium levels indicate strong hedging demand
and expectations of continued currency weakness.
These indicators reflect market anticipation of rupee depreciation,
strong importer hedging activity,
and cautious exporter behaviour across the forex market.
Asian Currencies vs Indian Rupee Performance
While several Asian currencies have shown relative stability,
the Indian Rupee stands out due to heavy portfolio outflows,
trade imbalance, and high sensitivity to oil prices.
This divergence highlights India-specific challenges,
rather than pointing to a broad regional currency crisis.
Risk-Off Sentiment and Global Market Pressure
The broader risk-off sentiment continues to dominate global markets.
Equity sell-offs, cautious bond positioning,
and reduced exposure to emerging markets
are reinforcing pressure on the Indian currency.
In such an environment, safe-haven assets gain strength,
emerging market currencies struggle,
and overall market volatility increases.
What Lies Ahead for the Indian Rupee?
In the near term, the Indian Rupee is likely to continue
hovering near record lows as dollar demand remains strong,
capital inflows stay muted,
and global uncertainty persists.
Factors that could stabilize the rupee include
improvement in global risk sentiment,
revival in foreign capital inflows,
softer Brent crude prices,
and clear policy signals from the RBI.
Final Analysis: Is the Rupee at a Turning Point?
The current phase of rupee depreciation reflects
both structural and cyclical challenges.
While RBI intervention can reduce volatility,
a sustainable recovery in the Indian Rupee
will depend on balanced capital flows,
trade deficit control, and supportive global conditions.
Until those factors align,
the narrative of the Indian Rupee hovering near its all-time low
is likely to remain relevant,
keeping traders, investors,
and policymakers on high alert.
No comments: